What Happened this Week?
The bears took control of the market this week. Now we wonder if they can continue the momentum or if dip buyers will put price action back into the bulls' hooves (hands). There was an instant change in character to start the new month. The tone turned sharply on Wednesday when Fitch Ratings downgraded the U.S. government’s credit rating from AAA to AA+. This was a result of the game of chicken the Republicans and Democrats played over the debt ceiling earlier this year.
The U.S. government's reliability to pay back its debt is the foundation of our debt driven economy. The downgrade from one credit rating agency triggered losses of more than 1% across the TSP stock funds Wednesday. Stocks were down again on Thursday and the legitimacy of the pull-back was starting to solidify.
Earnings reports from tech giants Amazon and Apple were the next major obstacles for investors. Both reports came after the closing bell on Thursday. Amazon's report sparked buying while Apple's was less to celebrate. The dip buyers driven by the Amazon report lifted stocks in the first half of Friday's action, but they suddenly lost control mid-day and the U.S. indices slipped to their lowest closing price for the week.
Looking Ahead
Friday's reversal did not inspire optimism to buy or hold stock funds. We've heard chatter on TSP Talk Forum of investors willing take their gains from July and sit out August. We've watched some of the top performers move to the sidelines to protect gains in The Last Look Report. But these are members who are willing to miss out on more gains to protect their capitol. So, you must ask yourself how risk averse you currently are. The answer is specific to your situation, goals, and temperament.
Scroll down to the C-fund chart below and you'll see a similar start to July, a month where the C-fund eventually gained more than 3%. For some, this pull-back has been a buying opportunity, and the best of them will have a plan to abandon ship if things get worse. Do you have an investment strategy? If not, try out The Last Look Report. We watch trends among the hundreds of investors in the TSP Talk community coupled with the market driving news all sent to you 30 minutes before the TSP trade deadline. It is a perfect introduction to the many resources TSP Talk has to offer you in your goal for a prosperous retirement.
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TSP Funds
All four TSP funds outside of the G-fund were down for the week. The worst loss among them was the I-fund which fell 2.93% this week but was the only stock fund in positive territory for Friday's action.
Bonds had a volatile week for their standards. Ultimately, the F-fund lost 0.6%, but that was with a gain over 0.8% on Friday.
Here are the weekly, monthly, and annual TSP fund returns for the week ending August 4:
The SPY (C-fund) took a dip this week. The C-fund was up modestly on Monday to finish up the July trading, but the first four days of August were all negative. The C-fund fell 2.4% in the first four days of the new month. Tuesday's losses were modest, it was the gap down open on Wednesday that was a change from the July status quo. SPY price fell further Thursday to close below its 20-day EMA for the first time since May. The SPY price now sits between two open gaps.
Dip buyers made an attempt to recapture the new losses but lost their grip intra-day Friday. A similar set up turned out to be a buying opportunity at the beginning of July (red square), but so far, the latest dip has sustained its losses. The SPY ended near its low for the week and the C-fund settle with a 2.26% loss for the week.
The small-cap S-fund (DWCPF) may have taken a lessor loss than the C-fund for the week, but that was only because it sharply outperformed the C-fund on Monday with nearly a 1% gain. The S-fund went on to lag the C-fund for the rest of the week (the first four days of August the S-fund fell 2.65%) but ended the week with a 1.69% loss for the week.
The ETF EFA (I-fund) gapped down to start the week. The ETF gapped down again on Tuesday. Through Thursday the I-fund was down 3.25% and an open gap from mid-July was closed. The I-fund finally had an up day on Friday, and it came while the C and S-fund added to their weekly losses. Ultimately the I-fund lagged the TSP funds for the week with a loss of 2.93%.
There is something brewing in the bond market. BND had a more volatile week than you'd expect in bonds. The F-fund moved 0.6% or more in either direction during three of the five days this week. That includes its 0.83% gain on Friday. The trend is still down for BND, but it has not been able to stray too far from its 50 and 200-day EMAs this year. There is also an open gap above that could provoke more buyers. The F-fund fell 0.60% for the week.
Good luck and thanks for reading. We will be back here next week with another TSP Wrap Up. You can read our daily market commentary on the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.
Thomas A Crowley
wwww.tsptalk.com
Last Look Report
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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
